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Strategy & Partnerships 3rd floor, CHQ
MA Road Srinagar. 0194-2502649
Sp.chq@jkbmail.com
Policy on Risk
Management
Procedures-CTS 2010
Standard Cheques.
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 2 of 15
Document Control
Title
Policy on Risk Management Procedures- CTS 2010 Standard Cheques
Version No:
3.0
Created By Strategy & Partnerships Date of Creation 26.11.2013
Reviewed By Strategy & Partnerships Date of Review 14.08.2020
Approved By Board of Directors under BR No 20 Date of Approval 09.10.2020
Date of Next Review 09.10.2021
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 3 of 15
Table of Contents
S.No Contents Page No
01 Introduction 5
02 Objective 5
03 Scope 5
04 Eligibility 6
05 Limits and service charges 6
06 Cheques issued in CTS Clearing 9
07 Risk Management Procedures 10
7.1 Collection of CTS 2010 Standard Cheques 10
7.2 Payment of CTS 2010 Standard Cheques 10
7.3 CTS 2010 Standard Cheques-Best Practice Guidelines 12
08 Ownership & Review 14
09 Disclosure 14
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 4 of 15
Glossary
Abbreviation/ Acronym
Explanation
CTS Cheque Truncation System
MICR Magnetic Ink Character Recognition
UV Ultra Violet
RCC Regional Collection Centre
IQA Image Quality Analysis
DD Demand Draft
PO Payment Order
IBA Indian Banks Association
P2F Paper to follow
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 5 of 15
1. Introduction
1.1 Processing of paper based cheques constitutes an important segment of the payment and settlement
scenario in India. Settlement of cheques is arrived at on the basis of the physical presentation of paper
based cheques to the clearing houses of the state / city / UT for transmission to the drawee banks and
for payment thereafter.
1.2 Reserve Bank of India has initiated a number of proactive measures in the recent past with regard to
processing of cheques to reduce the time for realization of cheques and to leverage the technological
advancements in the Banking sector. Accordingly RBI introduced Express Cheque Clearing System,
Electronic Clearing Services, Speed Clearing, Cheque Truncation System et al. The notable amongst
these is the Cheque Truncation System (CTS 2010) in Delhi, Chennai, Bangalore, Chandigarh, Jammu
etc. CTS 2010 Cheques possess mandatory minimum security features like quality of paper, watermark,
banks’ logo in invisible ink, void pantograph etc.
1.3 Reserve Bank of India, vide its Master Circular on Customer Service in Banks RBI/2015-16/59/DBR
NO.Leg.BC.21/09.07.006/2015-16 dated July 01, 2015 under Para 5 regarding Opening/Operations
in deposit accounts with specific reference to sub para 5.7.5, advised Banks to put in place
“appropriate Board approved risk management procedures” while dealing with such cheques.
2. Objective
The new standard for cheques i.e. CTS 2010, with a set of minimum security features, would ensure uniformity
across all cheque forms issued by banks in the country and also help presenting banks while
scrutinising/recognising cheques of drawee banks in an image based processing scenario. The homogeneity in
security features is expected to act as a deterrent against cheque frauds, while the standardisation of field
placements on cheque forms would enable straight through processing both under CTS and MICR clearing.
3. Scope
This Policy document ensures the use of 100% CTS-2010 compliant cheques. The policy document, inter alia,
lays down detailed guidelines about CTS 2010 Standard Cheques, limits for cash payment / funds transfer,
charges per cheque leaf, free cheque leaves per year, issues related to collection & payment and best practice
guidelines and most importantly the risk management procedures to be adopted by Operative levels while
dealing with cheques.
4. Eligibility
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 6 of 15
i. All existing as well as new customers maintaining Saving Bank Accounts, Current Deposit Account, Cash
Credit account or Secured Overdraft Account are eligible for availing CTS 2010 Standard Cheque Book
facility.
ii. Old format cheque books shall be replaced with CTS 2010 Standard Cheque free of any charges.
iii. Cheques shall be pre-printed with BU name and address.
iv. Valuable clients shall be offered customized cheque books with the title and account number pre-printed on
the cheque book. Any extra charges on account of customization shall be borne by the customer.
v. Cheques with value caps with regard to amount shall be issued at the request of the customers.
vi. For all CTS 2010 compliant cheques, whether payable at par / multi city cheques, no service charges shall be
levied on remittance and collection of these cheques (Inter Sol).
5. Limits and service charges
Limits for Cash Payment / Funds Transfer at BASE BU
Amount in Lakh INR
Per Day Limit
Per
Instrument
Limit
Account Type
Cash
Payment to
drawer
(Rs in Lakhs)
Remittance
(Electronic /
paper based) by
drawer
(Rs in Lakhs)
Third Party Cash
Payment
(Rs
in Lakhs)
Fund
Transfer
(Rs in
Lakhs)
General SB 5.00 10.00 0.50 10.00
Gen. Salary 5.00 10.00 0.50 10.00
Deluxe SB 10.00 20.00 0.50 20.00
Deluxe Salary 10.00 20.00 0.50 20.00
Variants of “Saving JKU” for
Universities
10.00 20.00 0.50 20.00
Variants of “Saving JKP” for
Police
10.00 20.00 0.50 20.00
J&K Bank Pink Gold
Saving Scheme for
10.00 20.00 0.50 20.00
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 7 of 15
Women
J&K Bank Pink
Platinum Saving
Scheme for Women
10.00 20.00 0.50 20.00
Current Account /
Cash Credit / SOD
Account
No Limit No Limit 0.50 No Limit
Limits for Cash Payment / Funds Transfer at NON-BASE BUs
Amount in Lakh INR
Per Day / Per Instrument Limit
Per Instrument
Limit.
No Per day Limits
Account Type
Cash Payment to
drawer
(combined Sols)
(Rs in Lakhs)
Remittance
(Electronic / paper
based) by drawer
(Rs in Lakhs)
Third Party
Cash
Payment
(Rs
in Lakhs)
Fund
Transfer
(Rs in Lakhs)
General SB 1.00 10.00 0.50 5.00
Gen. Salary 1.50 10.00 0.50 5.00
Deluxe SB 2.00 10.00 0.50 10.00
Deluxe Salary 2.00 10.00 0.50 10.00
Variants of “Saving JKU”
for Universities
2.00 10.00 0.50 10.00
Variants of “Saving JKP”
for Police
2.00 10.00 0.50 10.00
J&K Bank Pink Gold 2.00 10.00 0.50 10.00
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 8 of 15
Saving Scheme for
Women
J&K Bank Pink
Platinum Saving
Scheme for Women
2.00 10.00 0.50 10.00
Current Account /
Cash Credit / SOD
Account
2.00 10.00 0.50 10.00
i. Customer shall inform the Business Unit, one working day before the withdrawal, in case cash is required
beyond the prescribed limit.
ii. BU Heads shall have the powers to pay cash / transfer funds beyond the stipulated daily limits, after verifying
the credentials of the customer / status of account (additional due diligence).
Charges per cheque leaf
i Rs 3/- per cheque leaf plus GST shall be charged for SB Accounts, Basic Current Accounts,
Grameen Current Account and Cash Credit and SOD Accounts.
ii Re 2/- plus GST shall be charged for higher Current Accounts variants.
Free cheque leaves per year
i
Savings Bank
Account (All variants except BSBDA & Small Accounts)
20
ii Basic Current Account 50
iii Premium Current Account 150
iv Premium Plus Current Account 200
v Gold Current Account 300
vi Borrowal Accounts with limits up to Rs 10.00 lakh
50
vii Borrowal Accounts with limits above Rs 10.00 lakh
100
viii Platinum Current Account Unlimited
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
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Ix Pink Gold Saving Scheme for Women 200
x Pink Platinum Saving Scheme for Women Unlimited
Xi Saving JKU Platinum 80
Xii Saving JKU Diamond 80
Xiii Saving JKU Gold 80
Xiv Saving JKU Silver 80
Xv Saving JKP Platinum 80
Xvi Saving JKP Diamond 80
Xvii Saving JKP Gold 80
Xviii Saving JKP Silver 80
Xix Senior citizen & differently abled 25
6. Cheques issued in CTS Clearing
Cheques Truncation System (CTS) involves stoppage of physical movement of the cheque at the collecting Bank
level and replacement of physical instrument by the image of the instrument and the corresponding data
contained in MICR line. The Negotiable Instruments (NI) Act, 1881 was amended during the year 2002 paving
the way for presenting of electronic images instead of the physical instrument.
As the drawee banks do not receive physical cheques in the CTS mode of clearing and payment is made on the
basis of images, the onus of due diligence shifts to the presenting bank, as provided under explanation II to
Section 131 of Negotiable Instruments Act.
7. Risk Management Procedures
7.1 Collection of CTS 2010 Standard Cheques
Following precautions are to be taken while collecting cheques under CTS clearing:
i. Due diligence should be exercised regarding the physical feel of the cheque.
ii. All MICR rejects should be checked properly as the cheque may be fraudulently printed / photocopied.
Such cheque should be rescanned and if on rescanning all rejected MICR fields are rejected again, the
concerned official shall, instead of routinely repairing all rejected MICR fields, manually refer the matter
to the immediate incumbent In Charge. The incumbent In Charge shall carry out due diligence on the
intended transaction and only after being fully satisfied shall permit in writing manual repair of MICR
fields rejected by the capture system. Furthermore, it is to be ensured that the account, in which the
instrument is being collected, is an active account. Besides in case of high value instruments the same
may be notified to the drawee bank.
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 10 of 15
iii. Necessary enquiries shall be made in case of suspicious dealings and factors like amount of cheque,
history of the account in which given cheque is to be collected, antecedents of the customer and
relationship between payee customer and drawer shall be taken into consideration.
iv. BUs shall make use of Ultra Violet (UV) lamps to help them to detect any material alteration on the
cheques. Cheques of high value and / or cheques being collected in newly opened accounts, say
accounts opened in the last six months, shall invariably be scrutinized with UV lamps.
v. All cheques of Rs 1.00 lakh and above, received for presentation in CTS clearing shall be invariably
processed through UV Lamp. In non-CTS Centres all cheques of Rs 2.00 lakh and above shall be
invariably processed through UV Lamp. However in case of any suspicion, cheques for any amount may
be scanned through the UV lamp.
7.2 Payment of CTS 2010 Standard Cheques
Following precautions are to be taken while making payment of cheques under CTS Clearing:-
i. In case a cheque gives rise to suspicion of fraud, forgery, tampering or destruction of the instrument,
the paying BU / RCC must demand the physical cheque of the truncated cheque for verification and
should return the item with Return Reason Code 39 “Image not clear; present again with paper” OR
Code-40 “Present with Document”.
ii. No changes / corrections should be carried out on the cheques (other than for date validation
purposes, if required). For any change in the payee’s name, courtesy amount (amount in figures) or
legal amount (amount in words), etc., fresh cheque forms should be issued by customers. This would
help banks to identify and control fraudulent alterations.”
iii. Cheques which do not conform to the RBI’s guidelines on alterations / corrections on cheques may be
returned with return reason code 85 with the nomenclature as “Alterations / Corrections on instrument
are prohibited under CTS.”
iv. The back of the cheque be also examined especially in view of any writings on the back of the cheques
and endorsements thereon.
v. Under CTS clearing, the Presenting Bank is required to send the physical cheque to the drawee bank in
respect of following instruments:
• Cheques which have failed Image Quality Analysis (IQA) test.
• Government Cheques.
• Drawee Bank has returned the item with request to present again with paper document.
vi. Regarding issuing of a memo to a cheque presented at a non-base branch when the account has
insufficient balance (rejection code 1 to 3) or due to technical reasons (rejections code 4 onwards), for
time stamping the non-financial transaction the cheque should be routed through option ECHRAC and
cheque return charges should be deducted. However, cheque return charges should be levied only in
cases where customer is at fault and is responsible for such returns.
vii. The appropriate rejection code for clearing and over the counter returns should be ticked / punched in.
A Model List of Objections which is RBI compliant, whereby a unique code is given to a particular
reason for returning a cheque is given below:-
Code No. Reason for Return Code No. Reason for Return
(01-03) Funds (50-59) Account 1 Funds insufficient 50 Account closed 2 Exceeds arrangements 51 Account transferred to another branch 3 Effects not cleared; present again 52 No such account
(04-09) Refer to drawer 53 Title of account required
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
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4 Refer to drawer 54 Title of account wrong / incomplete 5 Kindly contact drawer / drawee bank and
please present again 55 Account blocked (situation covered in 21-25)
(10-19) Signature (60-69) Crossing/Endorsement 10 Drawer’s signature incomplete 60 Crossed to two banks 11 Drawer’s signature illegible 61 Crossing stamp not cancelled 12 Drawer’s signature differs 62 Clearing stamp not cancelled 13 Drawer’s signature required 63 Instrument specially crossed to another bank 14 Drawer's signature not as per mandate 64 Amount in protective crossing incorrect 15 Drawer’s signature to operate account not
received 65 Amount in protective crossing required / illegible
16 Drawer’s authority to operate account not
received 66 Payee‘s endorsement required
17 Alterations require drawer's authentication 67 Payee’s endorsement irregular / requires collecting
bank's confirmation (20-29) Stop Payment 68 Endorsement by mark/thumb impression requires
attestation by Drawer/Magistrate with seal
20 Payment stopped by drawer (70-79) RBI/Government 21 Payment stopped by attachment order 70 Advice not received
22 Payment stopped by court order 71 Amount / Name differs on advice 23 Withdrawal stopped owing to death of
account holder 72 Drawee bank’s fund with sponsor bank insufficient
24 Withdrawal stopped owing to lunacy of
account holder 73 Payee’s separate discharge to bank required
25 Withdrawal stopped owing to insolvency of
account holder 74 Not payable till 1st proximo
(30-49) Instrument 75 Pay Order/cheque requires counter signature 30 Instrument post dated 76 Required information not legible / correct
31 Instrument out-dated / stale (80-89) Miscellaneous 32 Instrument undated / without proper date 80 Bank’s certificate ambiguous/incomplete/required
33 Instrument mutilated; requires bank's
guarantee 81 Draft lost by issuing office; confirmation required
from issuing office 34 Cheque irregularly drawn/ amount in words
and figures differ 82 Bank / Branch blocked
35 Clearing House stamp / date required 83 Digital Certificate validation failure 36 Wrongly delivered/not drawn on us 84 Other reasons- connectivity failure 37 Present in proper zone 85 Alterations on instrument-Other than "Date" filed
(Alteration/correction on instruments are
prohibited under Cheque Truncation System. 38 Instrument contains extraneous matter 86 Fake/forged/stolen draft/cheque/cash order/
Interest Warrant/Dividend Warrant 39 Image not clear; present again with paper 87 ‘Payee’s a/c Credited’ Stamp required
40 Present with document 88 Other reasons (Please specify) 41 Item listed twice 92 Bank excluded 42 Paper not received 43 Encoding/listing error
7.3 CTS 2010 Standard Cheques – Best Practice Guidelines
Some of the Best Practice Guidelines with respect to CTS 2010 Standard Cheques are summarized below:-
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 12 of 15
i. Inward Clearing Process
1) Do Technical Scrutiny of the instruments.
2) Verify the signature on the cheque.
3) If Image is not clear or looks suspicious, ask for physical instrument from the presenting bank.
4) Do not process any P2F instrument without verifying physical instrument.
5) In case of CTS 2010 instrument check for VOID pantograph.
6) CTS cheques with alteration/correction should be returned even if the alteration is duly
authenticated by the drawer of the cheque (exception being date field).
7) Due diligence may be exercised in case of instruments for which MICR reject repair has been
performed by the presenting bank. The system provides an indicator for reject repair being done
for an instrument.
8) In case of high value transactions, it is suggested to seek confirmation of the account holder.
ii. Outward Clearing Process
9) Monitor the process of cheque movement from Drop Box to the Processing Centre.
10) In case of high value cheques, extra care may be taken.
11) UV lamp verification.
12) Check for any alterations, erasures on the cheques.
13) Check the quality of paper, printing and uneven spaces (if any).
14) Be alert while high value instruments are getting presented through dormant or inoperative
accounts.
15) For CTS 2010 standard instruments, look for Void Pantograph.
16) Processed CTS instruments should be stored with proper processed seal to avoid duplication.
17) In case of suspicion, verify from the customer before presentation.
iii. MICR rejects
18) Before updating the MICR code manually the bank should ensure the following:-
a) Verify the reason for MICR reject.
b) Double check whether all the CTS2010 features of the instrument are in order.
c) Check whether the account to which the instrument is being collected is an active account.
iv. Internal Process
19) Ensure that KYC is done for all the new accounts as per the guidelines issued, from time to
time, by RBI.
20) All the cheque leaves pertaining to an account closed should be defaced and then shredded.
21) Document the instruments as per Standard Operating Procedures.
22) Staff dealing with the customer accounts and cheques should be provided with fraud
awareness training on regular basis.
23) Provide the details of beneficiary in the account statement of the customer.
24) Verify the credentials of any agency or person engaged to carry out activities on behalf of the
bank.
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 13 of 15
25) Follow the RBI norms and act accordingly on the accounts where cheques are frequently
returning for insufficient funds especially high value cheques.
v. Customer Awareness
The operative levels should sensitize the customers to follow the Best Practice Guidelines with respect to
CTS 2010 Standard Cheques. Some of the best practices are summarized below:-
26) At the time of receipt of cheque book, make sure all of the cheques are intact and no cheque
leaf is missing. Report missing cheque leaves to your bank at once.
27) Store cheque book, deposit slips, bank statements and cancelled cheques in a secure and
locked location.
28) Always issue Account Payee cheques.
29) Don’t leave blank spaces in the cheque on the payee and amount fields.
30) Draw a line after the name, amount and wherever empty spaces are left.
31) Always use ball-point pen for writing cheques.
32) Never sign a blank cheque.
33) Always write the details of the cheques issued in the appropriate column provided in the
cheque book.
34) Reconcile / Review Bank statements regularly.
35) Never give your account number and other credentials to anybody.
36) Unless needed, destroy old cancelled cheques, account statements, deposit slips, ATM
receipts.
37) At the time of closure of an account, return unused cheques to the bank.
38) Use alternate channels of payment for High Value transactions.
39) Customers to approach & inform the Business Unit one working day before if cash is required
beyond the prescribed limit.
8. Ownership and Review
The ownership of the policy shall lie with S&P. The policy shall be reviewed annually.
In case of exigencies and to be in line with regulatory / statutory guidelines the Managing Director is empowered
to approve changes /modifications/ amendments/ relaxations/ exemptions, if any, required to be made in the
policy and same shall be placed before the Board for ratification.
Any guideline(s) issued by Regulator/s with regard to CTS 2010 standard cheques and / or any other matter
dealt with by this Policy shall be deemed to be part & parcel of this policy for operational purpose with immediate
effect. A note regarding such directive should be placed before Board for information.
9. Disclosure
In addition to the internal circulation of the policy on Bank’s Intranet, Bank retains the right to amend/ modify
the policy and displaying of the main features of the policy on the Bank’s web portal shall be deemed to be
adequate notice to the customers of the Bank.
(Policy on Risk Management Procedures- CTS 2010 Standard Cheques)
Page 15 of 15
The Jammu and Kashmir Bank Limited Corporate Headquarters, M. A. Road,
Srinagar 190001, Kashmir (J&K)
www.jkbank.com, www.jkbank.net
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